California Contractors’ Licensing Law Requirements, and Risks for Unlicensed Contractors and Property Owners


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California’s Contractor’s License Law requires contractors to be duly licensed to perform most renovations or new construction. When a contractor is not properly licensed, there may be significant consequences to these workers as well as to the people who hire them to perform the work.

Legal Requirements for License

California law requires that people who act as contractors on behalf of property owners who perform work on the home or install fixtures on a property be licensed by the Contractors State License Board. To qualify for a license, a contractor must demonstrate experience and take a test in the specialty category for which they want to be licensed. Additionally, they must have a bond to protect their customers. Corporations have to have a responsible officer who has a license.

Contractors are defined as anyone who undertakes or offers to undertake a project to construct, alter, add to, remove, repair or demolish any building, road, excavation, development or improvement. Contractors include individuals who work on heating and air units that are affixed to a property, submits a bid to construct a building or home improvement project or a temporary labor service that hires employees for these types of jobs.

Purpose of Licensing Law

The licensing law ensures that individuals offering contracting services have the necessary skill and understand local building laws and codes. Additionally, the law deters unlicensed individuals from performing contracting work. When unlicensed contractors perform construction work, the results can be catastrophic, potentially resulting in loss of life, serious injury or substantial property damage.

Limitation on Unlicensed Contractor’s Right to be Paid for Work

Contractors who are not licensed cannot sue to get paid for work that they have performed. This extends to any lawsuit based on contracts or equitable remedies and even if the unlicensed contractor has merits for the underlying cause of action.

Unlicensed contractors cannot legally recover the contract price that they contracted for or the reasonable value of labor and materials. Even if the property owner knew the individual was not licensed, this restriction applies. As such, remedies such as collection on a promissory, a deed of trust or a mechanic’s lien are not available to unlicensed contractors, even if the property owner agreed to these terms. The court simply holds these remedies as void as a matter of public policy because their goal is to secure payment to an unlicensed contractor for his or her work when that individual should not be paid because he or she does not have a license.

Refund of Payment

Additionally, the property owner can try to recover any amounts that they paid to an unlicensed contractor. California law provides that a person who uses an unlicensed contractor can bring an action in any court in the state with proper jurisdiction to recover all compensation that he or she made to the unlicensed contractor for the performance of the contract. This remedy is available even when the work was properly performed and the property owner is satisfied with it.

Risks to Property Owners

Even though property owners may be able to get out of paying unlicensed contractors, they may face significant risks by hiring an unlicensed contractor. These individuals will not have liability insurance, so if a guest, neighbor or other person is injured by the construction work, the property owner may be held liable for the injuries they suffer. If a worker hired by the unlicensed contractor is injured on the job and the contractor does not have workers’ compensation coverage, the property owner may be required to maintain workers’ compensation insurance for the injured employee or may be sued by the injured worker.

If work is performed on the property by an unlicensed contractor and the property owner does not obtain the necessary permits or does not have the work completed in accordance with applicable building codes, the property owner may be required to disclose these defects to potential buyers when they try to sell their property. These disclosures may affect the sales price and may impede a purchase. If these facts are not disclosed to the buyer and the buyer later discovers them, he or she may be able to sue the seller for fraud or other damages.

Contact a Construction Lawyer for Legal Assistance

If you would like to find out how you can check the credentials of a contractor or what steps to take after discovering that the contractor was not licensed, contact a construction lawyer for assistance.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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